The fourth largest in the world in terms of sales, India’s automotive industry is expected to catapult to US$ 251.4-282.8 billion by 2026 as per Automobile Industry Report (IBEF).
One of India’s leading employment hubs, the industry started full-scale manufacturing of vehicles on the country’s soil only after the 1940s, which makes the market less than 100 years old.
For decades, India mainly depended on imported vehicles from the US and Germany. When faced with service issues, a two-three months downtime was usually expected.
To bridge this gap, some companies began manufacturing auto components in India and gradually shifted to assembling the product with the help of partnerships.
Today, several positive trends shape this lucrative market, pushing it ahead of the curve globally. Following are some of them:
Pollution Standards: In a bid to follow its own emission norms, Bharat Stage Emission Standards (BSES) was formulated by the Government of India to control pollution from vehicles. India’s biggest win has been moving from BSIV to BSVI emission norms in a record span of around three years.
On the other hand, Europe took close to nine years to achieve the same result. The entire world has taken note and applauded India for this major achievement, which has further propelled it as the blue-eyed boy in the global automotive market.
Fuel agnostic industry: India is evolving and shaping up to be a fuel agnostic industry. The EV industry in the country is expected to expand at 36% CAGR according to India Energy Storage Alliance (IESA). The success of EVs is largely due to their low operating costs.
Leveraging newer forms of mobility, India’s graduation can be seen from petrol and diesel to CNG and LNG to electric and, finally, using hydrogen to power vehicles. Rising fuel costs and commitment to reducing emissions are driving factors behind this change.
R&D and manufacturing opportunities: Emerging as a lucrative R&D market for global players, India is climbing up the popularity ladder due to its elevated research capabilities, manufacturing abilities and quality software talent pool. With the global industry being driven by software, the mushrooming of Indian tech startups mainly in the automotive sector gives it an edge over other competitor countries.
In addition to this, there is a spike in opportunities for entrepreneurs and corporates from companies who are seeking a trusted manufacturing destination. International companies from Germany, France, US are outsourcing their requirements for materials, components and vehicles.
For example, Daimler, the German automotive giant sources gearboxes from India. In the history of the company, they have never sourced anything outside of Germany and opting for India when it came to gearboxes was a noteworthy accomplishment.
Test market: Another major trend is using the Indian market as a launchpad for global vehicles. A considerable amount of automotive products are being world premiered in India, which is increasingly being used as a testing market beyond a manufacturing hub.
Sustainable growth required: The flourishing automobile market needs extensive support and relief from the government. Infrastructure creation, concessions for auto companies, attractive finance regulations, tax relaxations and other kinds of assistance can help the industry grow sustainably.
There are external factors including fluctuating raw material costs and crude oil costs which should be addressed. There is a need for the government and its several bodies to come together to mitigate the unique challenges the industry is facing as it moves from milestone to milestone.
The growth of the automotive industry should not be looked at as a sprint, but rather as a marathon. It needs great support from the government and related stakeholders to see sustainable and positive change and further solidify its position as one of the leading global powers in the automotive market.
(Banwari Lal Sharma is the CEO of CarTrade Tech)